Small Farmer

Success Story

Bulletin No. 3 - July 1999

Acquiring Capital and Establishing a Credit History:

The North Florida Cooperative Experience

A group of local, limited-resource growers in the

northern Florida area, along with the U.S. Department

of Agriculture’s Agricultural Marketing Service (AMS) and

Natural Resources Conservation Service (NRCS), the West

Florida Resource Conservation and Development Council

(WFRCDC), and the Small Farmer Outreach Training and

Technical Assistance Project of Florida A&M University,

are working together with the goal of bettering the

farmers’ financial situations through innovative

marketing. These farmers joined together to form the

New North Florida Cooperative (Cooperative).

A cooperative, like any other business, needs access to

capital to finance operations and make necessary

purchases. If a cooperative doesn’t have sufficient equity

capital, it has to borrow the money and go into debt.

There are two types of debt, short- and long-term. Shortterm loans are used to finance operating expenses or

material inputs and are paid back usually within a year.

Long-term loans are obtained to finance fixed assets,

such as land, equipment, or vehicles, and are paid back

over a number of years.

For a cooperative to acquire a loan from a traditional

lending institution, such as a bank, it must have good

credit or substantial collateral. Since the Cooperative in

Florida was made up of limited-resource growers, it had

little or no resources. As a new business venture, the

Cooperative did not have a credit history either. As a

result, the New North Florida Cooperative was concerned

about its ability to establish a good line of credit, and it

needed to be able to borrow money to acquire the

necessary equipment to begin operations.

A major concern of the participants was what would

happen if the Cooperative failed to repay a loan. They

did not want to put their own farms or businesses in

jeopardy if the Cooperative experienced financial

difficulties. This concern was unfounded. The Cooperative

as an entity is responsible for its own debts. The

participants are not responsible, through their property

or finances, for the debts of the Cooperative. 

In preparing to meet with lending institutions, members

of the management team tried to anticipate the questions

and concerns of the loan officer. The management team

identified several critical factors that they felt had to be

conveyed to lending institutions and loan officers to

enhance their ability to obtain a loan.

1. Professionalism

2. Seriousness of purpose

3. Certification as a Department of Defense (DoD)

vendor (contact person, Linda Stanhope,

1-800-795-5772)

4. Proven success

5. USDA cooperation at local and national levels to

demonstrate credibility

To illustrate it was a professional organization, the

management team developed and submitted a concise

written proposal that detailed the need for the loan and

what the Cooperative intended to do with the money.

The written proposal and the formal presentation

demonstrated that they expected to be taken seriously

and promoted self-confidence among Cooperative

representatives.
While professionalism is an important first step, a lending

institution is concerned about a client’s determination

to succeed in business and to repay the loan in a timely

manner. The management team showed a confident

purpose and resolve in its meetings with the lending

institutions, thereby demonstrating that the Cooperative

was serious about business success and timely loan

repayment.

The management team took a copy of its DoD Order for

Supplies and Services certification as a School Lunch

Program provider to its meetings with lending institutions.

This showed its resolve to become a respected vendor to

the School Lunch Program and not just a sporadic or

occasional provider. It also showed the lending institutions

that this fledgling cooperative of small farmers was taking

its business seriously enough to realize the need to work

with DoD and to follow DoD procedures. Probably the

most important aspect of the DoD certification was that

it lent credibility to the Cooperative from the Federal

Government.

The Cooperative had approached the lending institutions

for financial assistance to improve its business efficiency

and capabilities. It had met and was continuing to meet

a delivery schedule with the local school district. The

money the management team requested was not for

initial start-up costs but, rather, to purchase equipment

to improve its effectiveness and expand its operation.

The Gadsden County Food Service Director’s endorsement

of the Cooperative was very helpful in convincing the

loan officer to approve the loan.

The fact that USDA was working closely at both the local

and national level with the Cooperative also lent

credibility to the management team’s request for a loan.

The lending institution could see that these various

agencies within USDA had sufficient confidence in the

Cooperative to actively assist it with technical expertise

and resources.

The Cooperative first applied for and received a loan

from the Jackson County Development Council (JCDC).

JCDC is a community-based, nonprofit organization

established to work with the community to increase local

economic opportunity through the Empowerment Zone/

Enterprise Community Program. A second loan was

secured from a local lending institution. The loans enabled

the Cooperative to purchase necessary postharvest

handling equipment and establish an efficient valueadded operation.

Acquiring capital and establishing a credit history were

important steps in taking the Cooperative from a

promising concept to a viable business that enabled

money to flow to and within the community. Looking

back, the Cooperative realizes how important these steps

were to its success. The effort in preparing for the loan

interview paid off for the New North Florida Cooperative.

This bulletin is the third in a series of four targeted to

inform small farmers across the country of the potential

of innovative marketing enterprises. The other bulletins

describing the experiences of the New North Florida

Cooperative are:

3 Small Farmer Success Story: Marketing Fresh Produce

to Local Schools

3 Small Farmer Success Story: Cultivating Customers

in a Local Market

3 Small Farmer Success Story: Successes of the New

North Florida Cooperative

A full report on the Cooperative can be obtained at USDA,

AMS, T&M, MTA, Room 1207-S, 1400 Independence Ave.,

SW., Washington, DC 20250; telephone 202-720-8326;

fax 202-690-3616; or e-mail dan.schofer@usda.gov.

Information on farmer direct marketing and farmers

markets is available on the Internet at

www.ams.usda.gov/marketing.htm.

This bulletin was made possible by the joint efforts of

Dan Schofer (AMS), Glyen Holmes (NRCS), Vonda

Richardson (FAMU), and Charles Connerly (WFRCDC).

Small Farmer Success Story Bulletin No. 3 - July 1999

The U.S. Department of Agriculture (USDA) prohibits discrimination in all its programs and

activities on the basis of race, color, national origin, gender, religion, age, disability, political

beliefs, sexual orientation, and marital or family status. (Not all prohibited bases apply to all

programs.) Persons with disabilities who require alternative means for communication of

program information (Braille, large print, audiotape, etc.) should contact USDA’s TARGET

Center at 202-720-2600 (voice and TDD).

To file a complaint of discrimination, write USDA, Director, Office of Civil Rights, Room 326-

W, Whitten Building, 14th and Independence Avenue, SW, Washington, DC 20250-9410 or

call 202-720-5964 (voice or TDD). USDA is an equal opportunity provider and employer.